Monday, March 28, 2016

Fully Including And Using Brains

Reply to thread: Clarifying The Popularity Of Three Economic Rules

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Ad Nihilo,

1. You're not addressing my main argument. Either you know that you can't hit the target... or... you're not seeing the target. Just in case it's the latter...

I value X and Y but I value X more than Y...

X > Y

A. I vote for Y
B. Y happens to be implemented
C. Y uses resources
D. The resources that Y uses could have been used for X
E. Quiggin's Rule is broken
F. You agree that Quiggin's Rule should not be broken

2. A large chunk of your argument is relevant to anarcho-capitalism. I am not an anarcho-capitalist. I am a pragmatarian. Of course you're welcome to attack anarcho-capitalism in this thread! But please don't be under the impression that you're actually attacking my own view.

3. Yes, we pool our cognitive resources. I strongly agree with this concept. In fact, here's a slice of what I recently wrote in another thread...

Today I watched this excellent video on Youtube... Human Cognitive Evolution: How the Modern Mind Came into Being - Merlin Donald. He argues that humans form a distributed network. Our brains aren't literally linked together though. So in order for the network to process information... we each need to share our individual information. If we share inaccurate information, then the output will be inaccurate. This is the basic concept of garbage in, garbage out (GIGO).

Everybody would benefit from a network that's...

1. larger
2. more accurate
3. more efficient

"Homing in on the right solution" is inefficient and it's also inaccurate. It takes too long to access information that most likely doesn't come very close to people's valuations. Democracy is certainly efficient... but it's far less accurate than homing. Representation is a small, inefficient and inaccurate network. Removing any amount of brains from the network is extremely stupid. This is why slavery is also stupid. Unfortunately, this is not why we oppose slavery. We oppose slavery for moral reasons. In other words, we oppose slavery for the wrong reasons.

You're bored with the scenario of people selling shit to each other. You're more interested in the scenario of replacing voting with spending. From my perspective your interest is incoherent. This is because, from my perspective, both scenarios address the issue of improving the efficiency and accuracy of communication.

So I think that your incoherence stems from your failure to perceive commerce as communication. What we consume depends entirely on how and what we communicate to each other. Your analysis will become far more coherent if you manage to focus on the communication aspect.

I'm sure that you agree that slavery is stupid. But why, exactly, do you think it's stupid? As I explained, I think it's stupid because it removes brains from the network. The more brains that are removed from the network, the less powerful it is. By this same notion... the less fully a network utilizes the brains it contains, the less powerful it is.

As you pointed out... our society has different institutions. Here are three very different institutions...

A. democracy
B. representation
C. markets

These three institutions are very different. As such, they can not be equally good at...

1. including brains
2. utilizing brains

Democracy: good at including brains, bad at using them. In that same other thread I wrote...

One clear drawback of this method is that it's far more time consuming than simply voting. Even if there was an app for it then it still wouldn't be as fast as people simply raising their hands. Not only is it more time consuming... but it requires more mental effort. Unless you're Buridan's ass... it shouldn't be too difficult to decide that you prefer to eat at The Dumpling Palace. It requires more brainpower to decide exactly how much you prefer to eat at The Dumpling Palace. It's one thing to determine your preference. It's another thing to determine the intensity of your preference.

Representation: incredibly terrible at including brains, bad at using them. Elizabeth Warren doesn't get to decide for herself how she spends her portion of the budget. Which means that her brainpower isn't fully utilized.

Markets: good at including brains, good at using them. On a daily basis, each and every individual makes difficult decisions about how to allocate their limited resources. These difficult decisions fully utilize their brainpower. These difficult decisions utilize all the information that's stored in their memories. These difficult decisions utilize all their hindsight, insight and foresight. These difficult decisions utilize all their processing power.

As a pragmatarian.... I have absolutely no desire to eliminate the public sector. My desire is for human brainpower to be fully applied to public goods like it's fully applied to private goods. This could be accomplished by creating a market in the public sector. People would simply choose where their taxes go.

However, the public sector is hardly the only space that's missing a market. Right now I'd definitely be willing to pay you a penny for your thoughts! But I definitely wouldn't be willing to pay you a million dollars for your thoughts! Narrowing it down to an exact amount would require brainpower.

You can certainly argue that we are better off not knowing how much I truly value your time and thoughts. But then you'd be arguing that we're better off when networks do not fully utilize their brains.

Companies also fail to fully utilize brainpower...

Russ Roberts: Let's talk about your 1937 paper, "The Nature of the Firm." You were trying to answer a question--an interesting question, remains a good question; it was a good question in 1937, it's still a good question, which is: If capitalism and markets and prices, the Hayekian system of communicating information via price signals, if it works so well, why do firms exist? Because firms are almost by definition top down rather than bottom up. They use command and control rather than purchases within the firm, although there are exceptions to that. Some firms do use price signals for their decision-making inside the firm. But many firms do not. Their decisions are made not by prices but by fiat, by decisions on the top. Now, you wrote that paper when you were very, very young, the first part of it, correct?
Ronald Coase: That's right. I wrote it while I was an undergraduate. It seems obvious to me. If you go into a firm and you say to someone: Why did you do this? He'd say: Because I was told to do it. He doesn't talk about pricing at all. Almost of all the things you do within a firm are not controlled directly by prices at all. Your boss tells you what to do and you do it.
Russ Roberts: How did you come to write that paper as an undergraduate.
Ronald Coase: Oh, I was interested in how firms actually operate, and if you start studying how firms actually operate you find that they are not concerned with prices directly at all. A person who is working in a firm does what he's told. That's the way it operates.
Russ Roberts: So, a firm is an island of socialism in a capitalist world.

Also...

We are biased toward the democratic/republican side of the spectrum. That’s what we’re used to from civics classes. But the truth is that startups and founders lean toward the dictatorial side because that structure works better for startups. It is more tyrant than mob because it should be. In some sense, startups can’t be democracies because none are. None are because it doesn’t work. If you try to submit everything to voting processes when you’re trying to do something new, you end up with bad, lowest common denominator type results. — Peter Thiel, Girard in Silicon Valley

A firm is a network of brains. It makes sense that firms can't be democracies. As I pointed out, democracies are good at including brains, but bad at using them. Firms can clearly be dictatorships. But even the wisest and most benevolent dictatorships can't fully utilize the brains they contain. If we accept the assumption that it's desirable for brains to be fully utilized... then the logical conclusion is that firms should be markets. A firm is a boat that should be steered by the spending decisions of the people in the boat.

4. I am familiar with David Graeber's work. Just like I'm already familiar with Mariana Mazzucato's work. Unfortunately, I don't have a link to prove that I am familiar with her work. But if you look on my blog you'll see that I link to the Crooked Timber blog. I consistently take the time and make the effort to learn and understand my opponents' arguments.

The only significant cost this will impose on you is the time cost it will take to actually read shit and get properly informed. But then wouldn't you rather argue things in ignorance on the internets with people who are even more ignorant than you? The latter is certainly much more entertaining :p - Ad Nihilo

In the OP of this thread, I said that Quiggin's Rule was named after the economist John Quiggin. Quiggin is a liberal economist. He's certainly properly informed so I would definitely prefer to argue with him. So here's what I wrote to him... The Inadequacy Of The Opportunity Cost Concept. And here's the extent of his response. It's... underwhelming. To say the least.

You are extremely informed. Well... at least compared to other members of Nation States. And unlike Quiggin, your response is definitely not underwhelming. That being said, your response is nowhere near the target. You sure made a lot of shots... but none of them were even in the right direction. None of them came close to addressing my actual argument.

I'm pretty sure that Quiggin is informed enough to clearly see my target. But... I'm guessing he's also informed enough to know that he can't hit it. Therefore... he decided to simply share my target rather than attempt to hit it. Which is entirely understandable.

If you make the effort, I'm sure that you could see my target. But, to be completely honest, I'd be surprised if you could actually hit it given that Quiggin was smart enough to not even hazard a shot. Quiggin didn't link me to Graeber... but you did. Is it because Quiggin is not familiar with Graeber's work? Nope. Quiggin didn't link me to Mazzucato... but you did. Is it because Quiggin is not familiar with her work? Nope. Quiggin didn't link me to Kay... but you did. Is it because Quiggin is not familiar with Kay's work? Nope. Quiggin didn't link me to Piketty's work... and neither have you. Is it because Quiggin is not familiar with Piketty's work? Nope.

Quiggin didn't make these shots because he understands that none of them would come even close to the target.

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